Crane Still Raising Retail Bar After 51 Years

The industry's TV retailing pioneers haven't all retired from the scene. There's at least one still going strong: Ken Crane, the founder of the eight-store Los Angeles-area chain that bears his name.

At 81, this 51-year veteran of the consumer electronics retailing wars is arguably the oldest of the originators who continues to show up in the office every day, though much of the day-to-day business operation has been turned over to his son Casey and daughter Pam.

During his tenure at the helm, Crane has piloted the retail business through at least three major phases: in the beginning as one of the nation's first TV-only retail stores; then as the first single-brand Magnavox Home Entertainment Center; and now as a home theater specialty store. The chain currently is entering yet another phase, as it strives to become the L.A. market's high-tech leader with advanced product exclusives and traffic-generating promotions.

Credit for orchestrating that effort, Crane is quick to point out, goes to Tom Campbell, the plugged-in promotions specialist who joined Ken Cranes last year after making then privately held Dow Stereo of San Diego one of the nation's most visible retailers.

As for Crane himself, the eyes aren't as sharp as they once were and his gait is a bit unsteady. But the mind has the sharpness of a new Gillette Tara refill, and, according to Casey, he has no problem when it comes to recalling old business solutions that can be used to resolve new problems.

The Early YearsCrane had little background in electronics before going into retailing. A military reject, he spent most of World War II working at an RCA plant in Indianapolis, his hometown. He was responsible for ensuring that materials being requested were needed for the plant's war production, and he signed requisition requests by the hundreds. It was the need for a very short signature that turned Kenneth Crane into Ken Crane.

At the end of the war he moved to L.A. and found a job in another RCA plant, one that kept him on the road. Then, as a sideline, he sold surplus radios to retailers who were still having problems getting entertainment products.

His first store was launched, with $3,500 from his father, as a TV-only venture that he shared with his brother-in-law. Ryan's Television Sales carried his partner's name, as Ryan was already known for a car radio-installation business. But after five months, he opted out. Ryan, it seems, had no stomach for the woes that still plague the industry.

As Crane puts it, "The problem was the banks would buy the [customer time payment] contracts, but you would have to guarantee them, and the price of TV came out high and dropped faster than you could keep up with it. Many a time we bought merchandise, put it on the floor and would see it advertised at less than our cost."

Ryan had visions of hundreds of customers defaulting, but his timing was bad. Crane put his name up front just at the TV market started taking off, he said, and paid the original $3,500 investment back in three months.

Then as now, the ability to wheel and deal was an important survival tactic for industry retailers. "RCA had the best sets then and had a heavily advertised 10-inch for $397," Crane said. "It had 30 tubes and would work anywhere. I was offered a deal where I could buy sets with slightly damaged cabinets for 15% off the net price."

Buying them by the hundreds and having them touched up like new for $10 each, he said, "was one of the gimmicks I had going for a long time, until the RCA distributor got wise."

Most of the TVs being sold at the time were small-screen table models that "consumers could find in appliance stores sitting on washing machines." Crane soon got the idea of selling tables designed to match the sets - which marked the start of his long affiliation with the furniture side of the business.

Crane had a table designed and made for him by some friends in the cabinet business. "I thought I'd sell them on the side to other dealers," he said, "but before I even got started I discovered the RCA distributor selling my table. They saw it somewhere and they liked it and had it built for them."

The big break for Crane's venture came in 1953, when on the strength of the volume he was generating in his original small store, he beat out seven larger retailers for what was then a high-prestige Magnavox franchise.

Crane said his plan was to differentiate from other Magnavox dealers in L.A. by carrying the entire line. To do that he moved to a larger store location and acquired a warehouse, with parking in front, right across the street.

Rising Above Other DealersIn 1955, Ken Cranes entered its second phase by becoming the nation's first Magnavox-only retail store. To his surprise, Crane said, "Magnavox didn't think it was the thing to do. You would have thought they would have been gung ho for it. They didn't fight it, but they thought the other brands would bring people into the store whom I could switch to Magnavox."

For a retailer of the time, having a Magnavox franchise was akin to owning a gold mine. The products were high-end, high-quality, high-margin, in limited distribution and fair-traded.

Magnavox president Frank Freimann, considered something of a marketing genius, would quickly terminate dealers he caught discounting. He was also known to be reclusive and ran much of the business from his Manhattan apartment rather than the company's Fort Wayne, Ind., headquarters. So when Crane asked the regional rep, "When can I expect to meet Mr. Freimann?" he was told, "You'll probably never see him," except at the few dealer line shows he opted to attend.

In fact, Crane did get to meet Freimann when the executive, intrigued by Crane's sales level, detoured on one of his many visits to Hollywood to drop in at the store. "I was trembling," Crane related, "I didn't know whether I should clown with the guy or what. So I finally said, `I wondered why you waited so long to see me, you know I'm doing a good job for you.' He tapped me on the shoulder, and he said, `You are our best hope on the West Coast.' "

Crane said he "did things that anybody else could have done, but nobody had ever done it."

Freimann and Crane developed a strong relationship, and in ensuing years Magnavox adopted Crane's one-brand store model for its franchisees and would fly groups of dealers out to L.A. to study the operation.

Magnavox was best known for its fine furniture radio/phono and TV combo consoles, but its biggest model was just 6 feet long. As some customers in the L.A. market were demanding longer models, Crane had some 8-footers made up locally, and to keep the store exclusive, he equipped them with Magnavox electronics with yet another gimmick.

"I would get end runs, left over when they completed model runs, but I had to go through a little deceit to do it," he explained. Freimann used to have the remainders donated to one Catholic organization or another, and "I would be tipped off at the time by a service manager who was getting it and I would buy it from them. Stuff that was worth maybe $400, I would get for $25 to $35."

But in dealing with Freimann, there was a risk to such doings. Crane said another Magnavox executive warned him that "you won't be a dealer if Freimann catches you at it." Freimann, however, was aware Crane was selling the longer consoles and at one meeting, Crane said, "he asked me `whose components do you put in these big coffins?' I told him `I don't remember the name, but it's a small company in the Midwest and they sure make good stuff.' "

Of his experience with Freimann, Crane is proudest of meeting a challenge that was thrown at him, presumably in response to unfavorable comments Crane had made about some radio/phono console styles at a dealer show.

He recalled that "Freimann called me into his office and said, `You pretend to know something about cabinets, which I doubt you do, but I'm going to give you a chance to prove yourself.' He asked me to design a 6-foot console that would sell and told me, `I want this one done right or you won't be a franchised dealer next year.' "

With the help of his cabinet supplier in California, Crane did come up with a design Freimann accepted, "it ended up outselling any single item they had ever built, and they kept it in the line for three years."

A number of factors brought the glory days to an end for the dedicated Magnavox dealer. The death of Freimann in 1967 resulted in an internal fight for management control that saw top marketing executives leave. The coming of solid-state technology created major quality-control problems. And the 1974 purchase of Magnavox by Philips was followed by years of top-level management and policy changes that helped open the door to new competitors.

"There used to be 1,500 Magnavox-exclusive dealers, and I'll bet you won't find one of them today," Crane stated.

Changing With The IndustryCrane noted that the repeal of fair trade laws cleared the way for today's price-competitive marketplace, although "the end of fair trade didn't hurt us too much. We had a good momentum going, and we still had good traffic. But it was one of the worst things that ever happened to consumers. There could not be any more fair way to merchandise anything than to have a fair trade law. Everybody paid the same price. It even helped volume, because there was no squabbling about so-and-so got a better price somewhere else."

The result, even today, he contends, is that consumers on the lower economic rungs end up paying more for the same products than more affluent consumers who can walk into any store and get credit. Crane clearly remembers making a no-hassle sale of a $950 color console to a lady who told him her neighbor just bought the same model for $1,500 from a time-payment furniture outlet in their area.

The industry has changed in other ways, he said. "Now there are so many models and changes that even I can't keep up with it. I've had people call me and ask my advice on which of two or three models to buy. I have to admit to them, `There was a time I could answer your question, but now there are so many I would be afraid to try.' So I get them somebody here who is involved in this every day to help."

Crane is one of the very few retailers who accept trade-ins on new TVs, and one day not too long ago he spotted an aged RCA black & white console that had just come in. "I said, `There is a 941RCA.' My son Casey was standing next to me, and he turned to a salesman and said, `He does that all the time. How do we know whether he's bluffing or not?' So they went over and looked, and found a yellowed tag with the name. How I remember is that in the old days the numbers meant something, and that number meant the set had 41 tubes and was made in 1949."

The chain does a big business in trade-ins and resells them out of its warehouse store. But Crane says he's planning to put a few on each of his sales floors - a move that he hopes will "let us sell them off in weeks rather than years." Cranes has a technician who looks the sets over and reports on whether repair is economically practical. Restored sets are turned over to a cabinet refinisher, who also puts new finishes on new sets in response to customer demand. Sets that aren't rebuilt are sold to a salvager.

As for building an image of Ken Cranes as the destination for advanced digital and home theater products, the chain's new phase has already taken off.

More than half the color TVs Cranes now sells are digital-ready; sales this year of high-end Mitsubishi projection TVs have tripled; and as for home satellite, "we used to sell a few, a very few, but now we're selling 1,000 a month."

Crane said that Campbell "and the many things he's introduced into our company" - including new products and lines, promotions that have attracted crowds and gotten strong media attention, and initiating radio advertising - have a great deal to do with its current strong performance.

The transition to digital TV hasn't been smooth, however. Two years ago, Crane noted, all the hoopla surrounding the start of digital broadcasting and the introduction of the first sets cut significantly into his stores' high-end TV sales. The impact was particularly strong in L.A., "and for nearly a year I was almost surprised to see any customers coming into our store." But, of course, the market has settled down.

One move that isn't in the retailer's future is going public, as Crane said he values his independence too much.

"Maybe if I was 25 years of age, I'd consider it, but not now. I do know that many of those retailers who did that got big, and some got too big and they lost everything." When you go public, he said, "you lose control of the business. You may be chairman of the board, but it's the board that makes all the decisions."